Suppose that there are two goods, X and Y, that are competing for dominance in a market with network externalities. Furthermore, suppose that the market has chosen good X even though it is inferior to good Y and that the net benefits of switching from X to Y are $20 while the costs of switching are $30. If the market stays with good X, then __________________ has occurred. If the costs of switching were to fall to $15 and the market still stays with good X then ___________________________.
A. no market failure; market failure has occurred.
B. market failure; no market failure has occurred.
C. no market failure; there will still be no market failure.
D. market failure; there will still be market failure.
Answer: A
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The ____ is the absolute value of the slope of an indifference curve
a. marginal rate of substitution b. average rate of transitivity c. relative rate of utility d. marginal rate of transposition
An individual's demand curve for a good is derived by
a. varying the income level and observing the resulting total utility derived from both goods b. varying the price of one good and observing the resulting quantities demanded of the other good c. varying the prices of both goods and observing the changes in quantities demanded of both goods d. shifting the budget line to the left and calculating the loss in total utility e. varying the price of one good and observing the resulting quantities demanded of that good